In this new series, Personal Finance 101, the posts will provide a road map for how to best manage your finances in general terms.

While these posts will provide a wealth of information on various personal finance topics, don’t forget that the best course of action is to tailor the information to what fits your current needs/situation.

Why You Should Set Financial Goals

Setting financial goals is one of the easiest ways to hold yourself accountable, take control of your money, and motivate yourself. As I’ve mentioned in a previous post about setting financial goals, doing so affords you the opportunity to take stock of your current action plan and keep moving forward in a positive manner. When it comes to setting yourself up for future financial success, setting goals is the first step in building a strong financial foundation.

Personal Finance 101: How to Set Financial Goals

Whether it’s blogging about them, emailing them to yourself, or writing them down on a piece of paper, there are many ways to tangibly set financial goals. But what about how to actually set them in the first place? The following is a checklist for how you can define financial goals in a way that will best set yourself up for success in meeting them:

Create Goals that Matter to You

If your goals don’t matter to you or don’t fit into your life’s plans, you’re basically setting yourself up for failure. If you don’t need a car, you probably don’t need a goal that’s dedicated to saving a car fund either.

Additionally, if you plan to get married, having a wedding fund obviously makes sense. Just make sure to have goals that are focused on retirement and having an emergency fund as those are key pieces to becoming financially secure for everyone.

Make Sure Your Goals are Specific and Realistic

The best goals that are easiest to meet are those that matter to you and that are specific AND realistic. If you make $50K/year, it’s not realistic that you’ll save $100K in one year. Just as importantly, if you’re goal is a general “save more money” focus, it will be harder to reach than if you set a goal such as “save $5K in an emergency fund this year.”

Record Your Goals

As mentioned above, record those goals! Write them, blog them, email them, sing about them to your family and friends. Whatever your method for recording your financial goals, make sure to keep them in a place where you can easily refer to them. Bonus points in the realm of accountability if you share your goals with others.

Determine the Cost of Your Goals

How much will you need to save or cut back to reach your goal? If you want a new camera, figure out which type you’ll be saving for and set your goal for its total cost.

If your goal is to take a vacation next year, figure out your destination and how much it will cost for you to get there, enjoy yourself, and get home with money still in the bank (and no balances on the credit cards!). When you record your goals, make sure to include these figures.

Set a Target Date

This is part of setting specific goals. Going back to the camera idea, say your goal was to save $900 for the Cannon Rebel T3i and accessories. This is a great start to list the item and its cost, but what about when you want to save the $$ by?

This will greatly impact the nature of your goal: If you want to save the $900 over the course of 5 years, that’s a lot less you’ll need to save monthly than if you wanted to save the same amount in 1 year.

Create a Timeline

Timelines are a great way to chart your progress and give yourself mini check-points for reaching your goal. They can also help you break down large goals into more manageable pieces.

For instance, if you want to save $10K in your emergency fund in the next 4 years, creating a timeline for saving $2,500 each year for the next 4 makes it seem like less of a burden. Little by little, your savings will grow and you’ll give yourself a greater likelihood of reaching the goal because it’s easier to manage.

Start Today

There’s no time like the present to get to work on setting/meeting your financial goals! Each minute you spend doing something else or not focusing on your goals is a minute towards success that is wasted.

Hold Yourself Accountable

Financial goals are not a set-it-and-forget-it entity. Make sure to revisit your goals regularly so you can check your progress, re-calibrate whenever necessary, and keep moving forward.

Expect the Unexpected

 Life is not perfect much like setting/reaching financial goals isn’t. There will be setbacks; there will be unexpected expenses that derail your progress from time to time.

But when Murphy inevitably strikes and tries to keep you down, remember to get up, brush yourself off, and get right back to work. Your financial goals are the ticket to your future financial independence and that’s one journey you won’t want to miss out on!

How do You Set Your Financial Goals?